BDDK moves to slow lending as Turkish Lira rout continues
US stocks closed sharply lower on Monday amid a continued resurgence of coronavirus case in the US and Europe. The DOW led the slide, down 2.29% while the S&P and the NASDAQ shed 1.84% and 1.65% respectively. Yield on 10Y USTs closed 4bps lower at 0.8010%.
German business sentiment fell in October according to Monday’s release by the Ifo Institute. The Ifo business climate index fell to 92.7 from September’s revised 93.2 marking the first drop after five straight months of gains. Most of the businesses cited rising coronavirus cases as the major source of concern. The euro closed weaker at $1.1810 while yield on10Y DBRs closed lower at -0.580%.
Asia stocks were lower on Tuesday following Wall Street moves as pre-election stimulus hopes faded with a week before elections. The ASX led the slide, down 1.69%, while the HANG SENG and the NIKKEI shed 0.53% and 0.03% respectively. The CSI recovered from early losses to close 0.09% higher as Chinese industrial profits rose 10.1% YoY in September.
Turkey’s banking regulator, BDDK, tweaked rules for calculating banks’ asset ratios on Monday allowing banks to use include foreign-currency loans to other local lenders in the computation. The move is another step as authorities try to slow lending which has contributed to the lira rout. The lira, which slid beyond 8.10 to the dollar Tuesday morning having closed at 8.086 on Monday, is the second worst performer in 2020 after the Brazilian real. TURKEY 30s were weaker, trading in low 130 levels.
Brazilian economists upped their end-2020 inflation expectations in the latest central bank survey to 2.99% from 2.65% last week amid a recent spike in food and fuel costs. The increase in expectations is in line with expectations that the MPC will leave the Selic unchanged on Wednesday although aggressive rate hikes are anticipated in 2021 according to the survey. The real closed weaker at 5.6247 to the dollar while BRAZIL 30s traded about flat in the mid 101s.
Ukraine is hoping to reach an agreement with the IMF before going into the international bond market according to officials from the President’s office. A planned $700 million disbursement from the IMF is on hold amid issues of central bank independence. The country hopes an IMF mission in November will see the disbursement before year end else faces a tricky fate in bond markets should they be forced into tapping markets before the IMF disbursement; state-controlled Naftogaz had to axe a $500 million sale as investors offered steep terms.
SSA appeared to have shrugged off Monday weakness in the early hours of Tuesday’s session with bonds flat to higher and NGERIA looking to be the quickest out of the blocks up some 0.25 points. IVYCST also appearing to hold up well despite flashes of violence over the weekend as the election date draws closer.